ECON 1B03 Lecture Notes - Lecture 11: Nash Equilibrium, Root Mean Square, Oligopoly

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Interdependent rms: one rms decisions affects another rms pro ts. Duopoly: oligopoly with only two members in the industry. Collusion: an agreement among rms in a market about quantities to produce or prices to charge. Cartel: a group of rms acting in unison. Nash equilibrium: a situation in which economic actors interacting with each other choose their best strategy based on the strategies that others in the market have chosen. Game theory: the study of how people behave in strategic situations. The prisoner"s dilemma: a particular game between two captured prisoners that illustrates why cooperation is dif cult to maintain even when it is mutually bene cial. Dominant strategy: is the best strategy for a player to follow regardless of the strategies chosen by the other players. Increasing output has 2 effects on a rms pro ts: Output effect: if p>mc, selling more output raises pro ts.